Texas has emphasized the importance of the mineral rights of a property since the State’s founding and first constitution. Between this early emphasis and the prevalence of oil and gas production within the State (oil and gas is produced in 2/3 of Texas Counties), Texas has developed a robust body of laws concerning mineral rights, oil, and gas. These laws can be complex and can confuse or overwhelm property owners, particularly as they concern royalty calculations, rights of access, and dominant versus subservient estates. But to get to these issues, you must first determine who owns the mineral rights. Owning a property’s “mineral rights” refers to ownership of the mineral deposits under the surface of a piece of land. The rights to the minerals usually belong to the owner of the surface property, or surface estate. In Texas, though, those rights can be transferred to another party.
Surface Estate and Mineral Estate
When discussing mineral rights, documents will often refer to the surface estate and the mineral estate. The surface estate is the visible land at the surface of the property. The mineral estate includes the minerals contained below the surface of that land. The two estates are not the same and can complicate property sales and/or leases, because Texas, like most jurisdictions with private mineral rights ownership, permits a property’s surface owner to split the mineral rights from the surface rights and sell or lease the two estates separately. When the two estates are owned together, the property rights are said to be “conjoined.” When the surface and mineral estates are split, they are said to be “severed.” To avoid disputes and complications, it is essential to know if the mineral rights are included when buying a piece of land in Texas. A new landowner may not realize that the mineral rights to the land they are purchasing are not included in the conveyance.. Often, the severance of the surface estate and mineral rights occurred many decades ago.
When the mineral estate is not included in a property sale, property rights can get complicated. An unsuspecting landowner may be getting less than they expect when they purchase their new property. A current landowner that has rights to both the mineral estate and surface estate may opt to hold on to the mineral estate while still selling the property. They can then lease the mineral estate to another party even with new owners of the surface estate. More complications arise when a mineral estate is leased to a company that wants to extract minerals, because the producer will require access to the surface. If the surface estate owner does not agree to give access to the mineral estate through their property, legal battles may ensue.
The Valuation of Mineral Rights
Before buying, selling, or leasing the mineral rights associated with a piece of land, the value of the mineral estate must be determined. The value depends on many factors, including where the land is located, what kind of minerals are held within the land, how accessible the land is, the natural resources close to the land, and other variables. After the value of the mineral estate is determined, which may include having experts come to survey the property, negotiations can take place. When negotiating the buying or leasing of mineral rights, it is important to include a contract regarding how the minerals and other resources will be accessed, how much the surface estate will be disrupted, and who will pay for the damage to the surface while digging for minerals.
Ownership of the mineral estate may not lie with one individual or party. Some mineral rights are divided in many ways, including by percentage of ownership or by type of mineral. It can be challenging to determine what portion of the mineral rights is owned by what party. Extensive research is sometimes required to clarify mineral rights ownership. Oil and gas companies will often do thorough title research on a property, including researching both the mineral estate and surface estate. The ownership information should be found during the title research. A landowner can check the title insurance policy they obtained when purchasing the property for ownership percentages or they can perform their own title research to determine their ownership percentage of the mineral rights. An oil and gas attorney with thorough knowledge of Texas mineral rights law can do this research as well. This option will keep landowners from having to attempt to understand the complexities of the title documents and legal matters at issue. When dealing with an oil and gas company, a mineral rights owner may want to request a “division order” — the document stating the producer’s understanding of how produced hydrocarbons are divided among royalty owners.
Renewable “Green” Energy Complications
A new complication arising in Texas mineral rights laws is the addition of wind and solar energy leases to surface estates. Texas generated nearly 22 percent of its electrical power from wind and solar sources in 2020, and more surface owners are leasing their surface estates to energy companies for wind turbines and solar panels each day. Landowners, hoping to maximize the value of their land can now lease their mineral rights to oil and gas companies while leasing their surface to energy companies for wind or solar farms. Some surface estate owners, though, may find that mineral estate owners do not want wind or solar activities or vice versa. Even though wind and solar companies only need access to the surface, foundations for these energy sources can penetrate into the soil and possibly encroach on the mineral estate.
Oil wells can also disrupt wind currents and throw shadows onto photovoltaic cells, affecting energy production. This makes it important for surface and mineral estate owners and lessors to work together when trying to maximize the value of their properties. As alternative energy sources become increasingly common, mineral rights law will continue to become more complex. The addition of wind and solar energy in proximity to oil wells and natural gas resources will need to be legally clarified sooner rather than later.
